Wednesday, January 17, 2007

The reality is that the historical MLS model is fundamentally broken, and will soon be dead unless the MLS organizations recognize that innovators are essentially re-writing the rules of the game and changing consumer expectations (both buyers and sellers) on how, where, and to what degree of detail real estate listing information is made available to the public at large.

MLS organizations deal in data. However they are proprietary entities that apply arbitrary controls and rules to how data is handled managed and ultimately made visible to interested parties.

We can all see that every day new web based service providers (lets call them listing services or engines) and aggregators (those taking a variety of sources of data and subsequently knitting it together, think Zillow or down the road, Google) are providing increasingly robust and feature filled sites that tear down the barrier walls that MLS organizations have always hidden behind. Consumers do not care by which specific path their property data is taken into the public domain, what they do care about is that the data related to their property that is listed for sale is presented in the maximum level of detail, with visual tools (think videos, pictures and mapping functions), and the greatest possible transparency for potential buyers. Sellers understand that Buyers want lots of information, that is easily accessible, and that comes without obligation. Buyers want maximum personal control over their selection sorting and decision process until they are specifically ready to physically view a property or make a purchase offer.

These buyers and sellers will also want the ability to offer as much or as little compensation to intermediaries as they deem necessary. They will not necessarily think in terms of + or – 6%. They will see what others are offering, they will evaluate how their homes compare and they will factor in their selling criteria and need for representation or not, and assign a value to what they believe they need to do to be competitive. Some may offer far less than 6%, others may offer far more. Again the market will determine what is appropriate in any given transaction.

The market will ultimately define and determine who wins and who loses. MLS organizations that try to retain and defend their artificially defined “Area” will find themselves slowly squeezed to death. Those entities (MLS or otherwise) that provide complete accurate data in a timely fashion, and in variably configurable formats that consumers can manipulate depending on their wants and needs, will win.

Realtor’s or more broadly, professional real estate practioners, will always have a place in the market, however they will NOT be the FUNNEL. As professional advisors they have a role to play for those consumers who desire assistance on either side of a transaction. Consumers will evaluate what level of service they are willing to pay for and from those providers of services they wish to choose from. Again, a transparent market will self-determine who gets compensated and at what levels. Those who provide superior value added service and advice will be compensated accordingly. Those who simply previously acted as a data funnel into and out of an MLS database will be eliminated from the market.

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